The test score decline between 1967 and I980 was large (about 1.25 grade-level equivalents) and historically unprecedented. New estimates of trend in academic achievement, of the effect of academic achievement on productivity and of trend in the quality of the work force are developed. They imply that if test scores had continued to grow after 1967 at the rate that prevailed in the previous quarter century, labor quality would now be 2.9percent higher and 1987 GNP $86 billion higher.
This paper develops a measure of investment in education from the literacy level of labour market entrants, using the 1994 International Adult Literacy Survey.
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From the demographic profile of the 1994-1998 International Adult Literacy Survey, we derive synthetic time series over the 1960–1995 period on the literacy level of labor market entrants. This information is then used as a measure of investment in education in a two-way error correction panel data analysis of cross-country growth for a set of 14 OECD countries. The analysis indicates that direct measures of human capital based on literacy scores contain more information about the relative growth of countries than measures based on years of schooling. The results show that, overall, human capital indicators based on literacy scores have a positive and significant effect on the transitory growth path and on the long-run levels of GDP per capita and labor productivity. Quantitatively, our results indicate that the skills associated with one extra year of schooling increase aggregate labor productivity by approximately 7 %, which is consistent with microeconomic evidence (Psacharopoulos, 1994). Moreover, we find that investment in the human capital of women is more important for growth than investment in the human capital of men and that increasing the average literacy skills over all individuals has a greater effect on growth than increasing the percentage of individuals that achieve high levels of literacy skills.
When investments in education in developing countries do not produce higher growth, the problem may be the quality of the schooling —of the education infrastructure, of the initial endowment in human capital, and of the system’s ability to equitably distribute educational services. The consensus to support and emphasize public primary education for all (rather than secondary education for the few)—typically found in the most egalitarian societies—is most likely to increase the contribution of human capital accumulation to growth. Recent empirical studies question conventional wisdom about the importance of education to growth. These results partly reflect how international differences in the quality of education systems—defined by the systems’ ability to produce one marginal unit of productive human capital—are not taken into account. Dessus estimates neoclassical growth models on panel data in which the elasticity of human capital depends stochastically on different characteristics of the education system. Among characteristics that explain differences in quality are education infrastructure, the initial endowment of human capital, and the ability to distribute educational services equally among potential students. Giving priority to primary education for all rather than secondary education to a few is more likely to foster growth (for the same fiscal burden). But parallel actions are also probably needed – for example, promoting institutions that motivate skilled workers to spend time on growth-promoting activities and encouraging the inflow of foreign technologies to maximize the social return to public investment in education.
Human capital is almost always identified as a crucial ingredient for growing economies, but empirical investigations of cross-national growth have done little to clarify the dimensions of relevant human capital or any implications for policy. This paper concentrates on the importance of labor force quality, measured by cognitive skills in mathematics and science. By linking international test scores across countries, a direct measure of quality is developed, and this proves to have a strong and robust influence on growth. One standard deviation in measured cognitive skills translates into one percent difference in average annual real growth rates?an effect much stronger than changes in average years of schooling, the more standard quantity measure of labor force skills. Further, the estimated growth effects of improved labor force quality are very robust to the precise specification of the regressions. The use of measures of quality significantly improves the predictions of growth rates, particularly at the high and low ends of the distribution. The importance of quality implies a policy dilemma, because production function estimates indicate that simple resource approaches to improving cognitive skills appear generally ineffective.
Direct measures of labor-force quality from international mathematics and science test scores are strongly related to growth. Indirect specification tests are generally consistent with a causal link: direct spending on schools is unrelated to student performance differences; the estimated growth effects of improved labor-force quality hold when East Asian countries are excluded; and, finally, home-country quality differences of immigrants are directly related to U.S. earnings if the immigrants are educated in their own country but not in the United States. The last estimates of micro productivity effects, however, introduce uncertainty about the magnitude of the growth effects.
Using the secondary school science achievement scores obtained by the International Association for the Evaluation of Educational Achievement, this paper provides more direct tests than others on the effect of human capital on economic growth, bearing important implications for theory and policy.
This book presents a thorough economic analysis of both the determinants and the consequences of international differences in schooling quality. It is shown that cross-country differences in quality-adjusted human capital can account for a substantial part of the international variation in economic development. However, large increases in per-student spending over recent decades were not matched by increases in student achievement in most countries. In a simple principal-agent model, the book stresses the importance of institutional features of the schooling system such as central examinations, school autonomy, and private-sector competition. Microeconometric estimations based on data for more than a quarter of a million students reveal that international differences in these institutions, rather than differences in resources, can explain the large international differences in schooling quality.
This paper examines whether growth regressions should incorporate dualism and structural change. If there is a differential across sectors in the marginal product of labour, changes in the structure of employment can raise aggregate total factor productivity. The paper develops empirical growth models that allow for this effect in a more flexible way than previous work. Estimates of the models imply sizeable marginal product differentials, and reveal that the reallocation of labour can explain a significant fraction of the international variation in TFP growth.
Trade and growth theories predict a mutual causation of innovation and exports. We test empirically whether innovation causes exports using a uniquely rich German micro dataset. Our instrumental-variable strategy identifies variation in innovative activity that is caused by specific impulses and obstacles reported by the firms, which can reasonably be viewed as exogenous to firms’ export performance. We find that innovation attributable to this variation leads to an increase of roughly 7 percentage points in the export share of German manufacturing firms. The evidence is robust to several alternative specifications, similar for product and process innovations, and heterogeneous across sectors.
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